1) Intangible Assets

Intangible assets find a place in just legal precedents without any such physical object for representation. Some examples of intangible assets include patents and copyrights. When you wish to tokenize intangible assets, it is a must to ensure that the asset transfer model hitched to the blockchain network is similar to the real-world transfer module.

2) Fungible Assets

These assets are those that are easily replaceable by any similar item. One of the best examples of fungible assets is gold or wheat. It is easy to convert fungible assets into tokens as you can effortlessly divide them into other smaller units. Further, you can even use one token as a representative for a group of fungible assets like a heap of gold. It is important to note that the tokenization algorithm for fungible assets comes with an additional abstraction layer. A set of tokens is also related to a collection of interchangeable asset components.

3) Non-fungible Assets

These assets are the ones that cannot be broken further. Tokenization assists in breaking down these non-fungible assets into some digital shares that you can easily trade either in a limited fashion or in full. The example of tokenization for real estate and artwork reveals the possibilities of effectively converting non-fungible assets into tokens. The transformation of artwork into tokens begins with the launch of an unchangeable digital signature. The tokens offer representation for the artwork while retaining their uniqueness. As a result, you can easily break down these tokens into smaller sub-tokens that can be digitally signed. It is then possible to go ahead with the sale of tokens, just like the shares of original artworks.

4) Implementation of Tokenization

Different assets reveal the inputs you can implement to create tokens with the system based on blockchain. But have you ever wondered, how it is possible to convert real-world assets into tokens? The implementation of tokens considerably depends on smart contracts, which are even referred to as token contracts. These are programs that can assist in verifying business rules along with transferring value from one user’s wallet to another. It is essential to consider that the account-based model, as well as Unspent Transaction Output (UTXO), is presently one of the most preferred choices for implementing smart contracts. While the latter is chosen for cryptocurrencies, the formers are best for the networks that are running on hyperledger fabric and Ethereum. They both come with their benefits.

Operational Efficiency

Operational efficiency is the prime advantage of tokenization blockchain applications. Tokens assist in streamlining the IT systems and infrastructure sharing among all the participants without help. It can thereby reduce transaction costs to a higher extent. In addition, tokenization and even assets also help in automating simple receiving or sending transaction clearance and settlements, ensuring convenient and faster transactions. This helps in improving the management of single transactions efficiently.

Division or Conversion of Assets

The division or conversion of assets into small fractions simultaneously ensures that the ownership of the fractions of assets offers a better advantage for liquidity. Few hurdles to investment in the assets could boost many people to go ahead with it. The tokenization algorithms are likely to assist the sellers in the traditionally illiquid markets for conducting a transaction. Tokens can even showcase the prolific support system for inclusive finance. The investor’s location will never affect his or her access to the financial markets along with some new kinds of assets with tokenization in blockchain applications. For instance, with tokenization- a group of people can together buy a vacation house with ownership agreements deciding who will be using it each week.

Transparency

Transparency is the thing you can rightly refer to when someone is questioning you about tokenization. Blockchain, by default, provides the advantage of transparency, and all the transactions on any single blockchain network are easily accessible to all other network participants. As for physical assets, the worth of transparency offers better traceability at the same time while boosting the trust over ownership and origins of the asset. Thus, tokenization can come up with outstanding advantages in easier and more convenient identification of ownership of a certain asset and the chain of ownership related.

Single Gateway of Truth

The next essential feature in authenticating the growth and prospect of tokenization blockchain applications would simply refer to a single gateway of truth. Organizations end up collecting a significant amount of information for each asset. But interlinking and mapping data points such as license, intellectual property rights, rights to certain products, and product ownership are difficult. Thereby, numerous fragmented information points related to an asset can lead to the creation of avoidable circumstances.

With the assistance of the tokenization algorithm, blockchain can bring up a significant trust factor. This trust factor can work wonders in enabling business partners or competitors to come up and share all their data. Thereby, numerous members of an ecosystem can easily interact with a single digital representation of a particular asset. Slowly but steadily, it can boost efficiency via the value chain and introduce some new approaches available for collaboration. Tokenized assets even assist automation and simplify the process of extensive trading by using smart contracts.